While the Dominican Republic’s main trading partner by far is the United States, the country has diversified its exports and imports and expanded trade throughout the world in recent years. A very open economy and with a population of more than 9 million residents, plus a floating population of more than 3 million tourists, the DR is an attractive market.

It is important to note that as a member of the World Trade Organization, all subsequent treaties and laws passed and adhered to by the Dominican Republic are subject to the rulings and norms contained within that global trade framework.  In other words, multilateralism prevails over bilateralism, despite the global trend for the signing of regional and country-to-country agreements. In the case of the DR, in its quest for global integration, the country is associated to three major reciprocal trade agreements (US, Central America, Caribbean) and a fourth with the European Union pending for completion this year, with the complexities of managing different rules of origin, tariffs and terms of implementation of each. Trade negotiations and the subsequent managing of trade agreements in the DR are handled by two government departments – the Ministry of Foreign Relations and the Ministry of Industry and Commerce. The Ministry of Foreign Relations is responsible for negotiations leading to the treaties, through its National Commission for Trade Negotiations.

During the beginning of 2008 brought a sense of optimism regarding the Dominican economy and its place within the global commercial framework. The Dominican Republic placed among the top Doing Business reformers, according to a report by the World Bank. Nevertheless, the DR was ranked 97th of 181 countries, including 32 in Latin America and the Caribbean, showing there was room for much more improvement. Data in the Doing Business 2009 report is current to 1 June 2008. The DR improved its ranking from 110th for the previous 12 month period. Doing Business ranked economies based on 10 indicators of business regulation that record the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes, and closing a business. This year's report ranked 181 economies and reported on reforms in 113 of those economies. The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.

The Central Bank reported that the Consumer Price Index was at 9.4%, accumulated from January to August. Increases in food prices and the cost of school tuition affected the rates. Inflation in August was up 0.09% compared to July. Central Bank governor Hector Valdez Albizu notes that the Dominican economy was set to grow between 5% and 6% by the end of 2008 and that the deficit of the current accounts would settle between 8% and 9% by the end of the year. Valdez said that the accumulated rate was 7.57% during the first semester of the year.

But concerns continued to grow as the trickle effect from the US financial crisis was reflected in the DR. Inflation hit double digits for the first nine months of the year, according to the Central Bank. The bank reported that the Consumer Price Index (CPI) was up 2.38% in September in comparison to August and this puts the nine-month inflation rate at 10.76% for the year so far. The Central Bank explained that the increase was due to the rise in food prices and the seasonal increase in the cost of education. These two factors account for 80% of the increase in the cost of living.


Despite recent concerns, 470,542 new jobs were created between 2004 and 2008. In terms of trade, fuel, food, metals and capital goods represented 60.1% of imports and 61.0% of the current accounts balance. Valdez's report indicates that the Central Government's deficit in the first semester was RD$20.9 billion. Borrowing heavily with PetroCaribe.

Almost half of the subsidy the Fernandez administration has granted on electricity billings has been charged to PetroCaribe agreement, which allows the government to postpone payments for 25 years. According to statistics from the Ministry of Hacienda, between 2005 and July 2008, the government subsidized the electricity sector with RD$62.5 billion. Of that amount, RD$30.4 billion has been charged to the PetroCaribe agreement, as El Caribe reports. The PetroCaribe agreement allows for credits to up to 50% of the total petroleum bill, when the price of petroleum is more than US$52 on international markets. The newspaper reports that in 2007, the government had used up 73.6% of the budget allotment for the subsidy in 2008 as of the half year mark, or RD$15.5 billion of RD$21 billion.

Dealings with the EU and Caricom had been resolved, for the most part, with the DR entering into its second major trade agreement in as many years. The DR is now second only to Chile in the region with 48 trade agreements. The negotiations for the Economic Partnership Agreement (EPA) has been threatened by continuos disagreements by regional players. However, the DR, fresh of its negotiations with the United States, demonstrated maturity and experience during the negotiations process and insiders explain the DR has a great deal to gain from this particular agreement. Added fears from smaller and less developed Caribbean nations had put the agreements ratification and implementation in jeopardy, but on 15 October 2008 all fears were laid to rest as the DR signed into the agreement in Bridgetown, Barbados. The DR has been alloted a 30,000 ton sugar quota from the EU as well as developmental aid and other concessions. It is expected for the EPA with the EU to be a decisive turn for EU, Caricom and Dominican trade relations.

Though the DR seems to have succeeded in its dealings with the EU, trade through the DR-CAFTA have not been as favorable. The DR-CAFTA, which had been implemented in 2007, was expected to bring dynamic changes to the Dominican economy and increase trade volume with the United States. There was also an expectation of increased trade from other nations who were looking to use the DR as a launching point for their goods and services. The DR is the leading US trading partner among the DR-CAFTA member nations and was the sixth largest in Latin America in 2007, according to US Commerce Secretary Carlos Gutierrez. According to Gutierrez, exports from DR-CAFTA nations increased by 18.5% and bilateral trade between the US and Central America towards the DR increased by US$10 billion since the implementation of the agreement. Gutierrez highlighted the DR's trade growth since 2005, adding that it is difficult to find another country with a comparable growth rate during that same period.
However, Gutierrez says the trade deficit between the DR-CAFTA nations and the US was US$3 billion in 2007. The DR shows the highest trade deficit among the agreement's signatories. Gutierrez attributed the large deficit to the decline that textile exports have been experiencing since 2005, saying that this is linked to the shift in apparel manufacturing to China, and not a consequence of DR-CAFTA. Gutierrez argues that the situation would have been worse without the DR-CAFTA agreement.
To give an idea of the strength of the Central American market for the US, he commented that trade with DR-CAFTA countries is almost at the same level as with India and Russia. Deficit with US grows

The trade deficit between the US and the DR was at US$1.6 billion for the first seven months of year. The continued deficit in trade (when imports are higher than exports) is raising concerns about the DR-CAFTA agreement and its benefits for the DR. Critics say that these numbers contradict trends for other Latin American nations, which have shown a surplus in trade with the US during the same period. The rate at which the deficit is growing is also causing deep concern. During the first seven months of the year the deficit grew by 83.7%. For the same period in 2007 the deficit was only US$863 million. According to Hoy, there was a 19.5% increase in the value of imports, from US$3.3 billion to US$3.94 billion and a reduction in the value of exports, which went from US$2.431 billion to US$3.4 billion. Since DR-CAFTA went into effect in March 2007, a US$3.14 billion trade deficit has been accumulated over the 17-month period.
Hoy economic reporter Luis H. Vargas writes that economic policies in place have increased domestic costs making exports more expensive, at a time when the cost of imports has declined.

Vargas quotes a study by the US Commerce Department indicating the value of DR export values slipped from US$2.43 billion to US$2.35 billion. This downward trend dates to 2006 when export values dropped from US$4.53 billion in 2006 to US$4.21 billion in 2007. Meanwhile imports have increased at a faster pace. Vargas says that imports were valued at US$3.29 billion between January-July 2007 and grew to US$3.98 billion for the same period in 2008. This compared to the previous year increases, when imports increased from US$5.35 billion in 2006 to US$6.08 billion in 2007.

2008 and beyond
On 29 September the DR and Canada announced they would resume negotiations for a free trade agreement. Talks have been on the table for some time and many thought once the DR finished the European Partnership Agreement with the European Union, the Canadian talks would run smoothly. For reasons unknown, after the first round of talks were completed in February, negotiations were put on hold. Canadian Ambassador to the DR Patricia Fortier explained that each year more than 600,000 Canadians visit the DR, but only 2% of the DR's exports are sent to Canada. Fortier added that with the signing of an agreement and the negotiations of a open airspace, "blue skies," there can be an increased trade balance. According to Eduardo Dominguez, president of the Dominican Canadian Chamber of Commerce, the DR only exports US$25 million worth in goods and services to Canada, compared to US$600 million with the US, or 27% of total exports.

Still on the table for the DR are possible agreements with Taiwan and Korea. Though there is increasing trade with both Asian there has yet to be a solidified agreement that would canalize the trade process and making bi-lateral trading more efficient. Other possible agreements on the horizon include  Panama, Mexico, Canada, Cuba, China, Chile, Colombia, Haiti and Mercosur (Argentina, Brazil, Paraguay, Uruguay). Though talks have been minimal with Mercosur it is yet unknown how relations with the South American common market and the creation of UNASUR will affect, if at all, relations with the DR.

Finally, it looks the DR is inching closer to structuring a trade agreement with neighboring Haiti. Trade between the nations is voluminous, but it is unclear as to how much is traded, as most trade is informal. Recently Dominican Ambassador in Haiti Jose Serulle says that there is no better time than the present for the DR to sign a trade agreement with Haiti. He added that both governments are feeling the urgency. Serulle favors a broad-based agreement that is fair and helps strengthen relations between both nations. According to Serulle, both the DR and Haiti represent an important market and an agreement would only facilitate inter-country trade. Officials from both countries have consistently spoken of the need for an agreement, yet neither side has made any concrete moves to start the process.

(Updated October 2008)